Surely you thought that being an entrepreneur was going to be easy: have your own hours, do what you like the most, be your own boss. But not everything is “honey on flakes” when it comes to having your own company.
Suddenly you have to deal with upset customers, not-so-happy employees and, to top it off, financial situations.
What is financing?
Financing or financing is the process by which companies or people obtain resources to cover a need or undertake a specific project. Today, credit granted by banks is one of the most common and frequently used sources of financing.
In the specific case of companies, it should be noted that the financing options can be diverse. In addition to the opportunity to go to banks to request a loan, companies could seek the participation of investors who inject resources into the company.
On the other hand, talking about financing for Small and Medium Enterprises is a separate chapter. Although these types of companies have faced significant challenges in obtaining financing, little by little a variety of specialized solutions have begun to be generated for this productive segment.
What are the various financing options for small and medium-sized businesses?
Currently, there are two major financing options for Small and Medium Enterprises: credit and investment.
On the one hand, despite the fact that the criteria for granting credit represented an obstacle for SMEs to access resources from institutions such as banks, little by little this ballast has been disappearing.
In this regard, not only have banks entered into an improvement process, where products have been created to meet the needs and realities of small and medium-sized companies, but also financial alternatives have been diversified. Above all, Mexico has witnessed an irruption of technology companies specialized in granting credit for this productive sector.
On the other hand, it should be noted that investment became the only source of financing for SMEs for a long time. Especially understanding the investment by the close circles of the companies. Today, as in the case of credit, options have appeared, such as collective funding.
Small and medium-sized businesses also have a credit history
Although many think that requesting a loan is a symptom of financial mismanagement in your SME, this is not 100% true. According to INEGI, 22.7% of microenterprises in Mexico limit their growth due to lack of credit.
Imagine that your company is doing quite well, growing, having more and more customers and happy employees. And you consider that it is time to take the next step: change offices, have better facilities, invest in technology, this with a view that in the medium or long term, it will be an investment for your business.
But maybe you don’t have the immediate capital to do it. Asking for a loan is not bad, as long as you evaluate as a moral person how this financing will help and the impact that this credit will have on the finances of your company.
Things to consider when requesting a loan
Interest rates
Please, never, never take a loan no matter how small it is if you do not know what the interest rate is. The recommendation is, now that there will be elections, interest rates may vary due to uncertainty. Choose a fixed rate instead of a variable, that will ensure the amount to pay.
Different options of institutions
Check which financial institution is best for you. There are different products that can be attractive depending on what you need.
Requirements that may be asked of you
Annual income
Depending on the amount of money, the institution may ask to prove the minimum annual income to be able to make sure that you can cover the payment of your credit.
Be registered with the Treasury
Phew! This is very important. Even if your company is small, you need to be registered with the SHCP. To find out which regime best suits your needs, we share this sat.gob.mx/.
“Solidarity guarantee” that is, a very trustworthy compa
Many institutions ask for a joint obligor, credit references or joint guarantees. To choose a person or company that can serve as a reference, do not forget to have communication with that person or company so that all the terms are clear regarding the credit or financing that you are going to request.
Although there are other institutions such as La Tasa that, thanks to its accredited selection process, do not need this figure. Only an analysis of your financial situation is made and the credit is granted without joint guarantee.
Documentation
Of course they will ask you for identification of the attorneys, tax returns, tax identification card.
Sources of financing of a company
Today, the sources of financing for small and medium-sized companies can be divided into:
- Banks. More and more banks are betting on providing financial solutions for small and medium-sized companies.
Currently, within the banking portfolio aimed at this sector, you can find various types of financing, designed to support SMEs in different needs. You can talk about financing ranging from Simple Credits or Revolving Credits that allow them to have the liquidity to carry out their day to day. Here, it is important to note that financial institutions have decided to expand their products and today it is possible to find credits even to support exports, or sustainability.
In addition to financing options, banks have opted to support administration issues, which makes it easier to make or receive payments through banking schemes.
- Today, under the protection of technology, various companies dedicated to the specific funding of small and medium-sized companies have been born in the national market.
Contrary to what one might believe, the financial amounts are in accordance with the needs of small and medium-sized companies, understanding their reality. For example, today there are alternatives that offer credits ranging from 50,000 to 6 million pesos.
- crowdfunding. Collaborative funding has been placed as an option to finance a project, although this alternative is more suited to projects that are in the entrepreneurial phase.
In addition to the above, it can be highlighted within the framework of the sources of financing to Non-Bank Financial Institutions and Government Programs.
Government support for financing
It also takes into account that there is special financing for certain market sectors that help in a more specific way supported by the government, such as
At Bancomext you can find more information and the complete list of sectors that are supported with financing from the government.
If your company is starting up and you need a little push, or if you have a more solid company that requires financing to grow or you need support in difficult times, look for options that fit your business.
Advantages and disadvantages of financing options for small and medium-sized companies
Despite the fact that the financing spectrum for small and medium-sized companies is opening up more and more, there are still a series of challenges to be addressed.
For example, in the case of bank financing, although it offers attractive conditions, a disadvantage that companies face are the requirements requested. And in this case, not only for banks, but for non-bank financial institutions (IFNB).
According to the 2018 National Business Financing Survey, the most recent, at least 51% of rejected loan applications had to do with not meeting requirements, such as having a credit history. In some cases, the lack of documentation was the impediment to access a loan.